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1、Auto Logistics and Supply Chain Management SummitThePracticeofVMIinChina陈陈 晖晖中国物流公司中国物流公司 执行总裁执行总裁1AgendanOurunderstandingoftheautomotivelogisticsneedsnWhatisVMIdefinition,proceduresandbenefitsnChallengesofVMIinChinanCasestudynBriefintroductiontoChinaLogisticsCompany2An automotive OEMs logistics nee
2、ds cover both inbound and outbound operations of parts and finished vehiclesPlantSuppliersConsolidationandLoadingCenterServicePartsDistributionCenterLogisticsforProductionPartsLogisticsforServicePartsLogisticsforCompleteVehiclesDealerDealer/ServiceStationBondedWarehouseforImportPartsOur understandin
3、g of the automotive logistics needs3Supply chain management(SCM)is the strategic management tool that coordinates the material and information flows across the value chain to support adaptiveness4“Demand-pull”value chain requires the companies to be flexible and able to“control”a large part or the e
4、ntire supply chainSuppliersManufacturingDemand indirectly drives manufacturing volume through forecastsWarehouseWholesale/Retail“Supply-push”Logistics ChainSuppliersB2BExchangeManufacturingDirectDelivery“Demand-pull”Logistics ChainManufacturing driven by actual demandTherateofsupplywassetbythemanufa
5、cturerinadvance,basedonexpecteddemandItwastheroleofthelogisticsproviderstoensureajust-in-timesupplyofcomponentsTherateofmanufactureisdeterminedonareal-timebasisbytherateofdemandWhilethismodelismoreefficient,itrequiresperfectintegrationofalllogisticsoperationswithinoneprocessSource:LehmanBrothers,A.T
6、.KearneyAnalysis5Third-party logistics providers(3PLs)can directly,or through a partner network,provide a range of servicesProcurementPayablesmanagementSupplierpaymentandconsolidatedinvoicingVendorperformancemonitoringandexceptionreportingJointprocessimprovementwithvendorsOverallfreightcoordinationF
7、ullloadtruckcarryingLess-than-loadtruckcarryingSmalllot(lessthan150pounds)carryingOrderconsolidationDeliveryschedulingExpeditingspecial/rushordersReturningandreprocessingundeliverableordersDeliverytracingPerformanceandexceptionmonitoringandreportingOverallinventorymanagementOptimizingsupplierordersc
8、hedulesOptimizingdealerorderschedulesCertificationofincomingshipmentsBarcodingPerformanceandexceptionmonitoringandreportingTrackingandReportingSystemsaccessibleviaInternetMaterialResourcePlanningOrderpreparation/assembly/consolidationSourcingofpackagingmaterialsPrintingofcorrugateand/orlinerboardmat
9、erialsLabelingShrinkwrappingofcasesandpalletsFreight and Distribution CoordinationWarehousing and Inventory ManagementMinor Assembly and PackagingProcurement6Difference between traditional business model and VMI modelTraditionalVMIPurchaseOrderPlacementWhenacustomerneedsproduct,theyplaceanorderagain
10、stamanufacturer.UnderVMI,thevendorgeneratestheorder,notthecustomer.InventoryTransparencyOnlyorderistransmittedtosupplierwhenproductisneeded.Thevendorcanviewthe“real-time”stocklevelofeveryitemthatthecustomercarriesaswellastruepointofconsumptiondata.InventoryReplenishmentThecustomerisintotalcontroloft
11、hetimingandsizeoftheorderbeingplaced.Thevendorisintotalcontrolofthetimingandsizeoftheorderbeingplaced.InventoryPlanThecustomermaintainstheinventoryplan.Thevendorisresponsibleforcreatingandmaintainingtheinventoryplan.7Simplest VMI workflowManufacturerSuppliers23411.The manufacturer approves the purch
12、asing terms with suppliers,including the commonly agreed inventory responsibility and maintenance scheme.2.The manufacturer sends product activity data to the supplier.This product activity is based on warehouse movement of product consumed at the assembly line level.3.Based on the agreed inventory
13、maintenance scheme,the supplier edits,approves and releases the suggested purchase order.4.The manufacturer approves this purchase order and send it to the supplier.8Consolidation and Loading Center is commonly used to reduce the complexity in coordinating multiple vendorsnQualityofdeliveryservicesf
14、romvendorstoline-sidemightbedifferentnVendorsshippingvolumemightbeverysmallgivenmorefrequent“demand-pull”ordersnVendorsmightneedalargeline-sidebuffertocompriseafull-truckloadandmake-upasafetystocknLargeline-sideareaisneededtoaccomplishunpacking,kitting,andpossiblysequencingofpartsbeforefeedingtoasse
15、mblylinenIndividualvendorsmightrentwarehousesforthemselves,withlimitedscaletosharewithothervendorsnConsistentdeliveryservicetoline-sidenOptimalshippingvolumetoreducetransportationcostandinventorycostnReducedrequirementonline-sidewarehousespacenCoordinationbetweensuppliersandproductionlinepossibletop
16、romotesynchronizationandJITHow Consolidation and Loading Center Approach HelpsPotential Issues in Simplest VMI Model9Win-win situation can be achieved for both manufacturers nPlanningandorderingcostsforthemanufacturergodownduetotheresponsibilitybeingshiftedtothevendornImprovedcustomerservicevendorsc
17、anbetterrespondtocustomersinventoryneedsintermsofbothquantityandlocationnReduceddemanduncertaintybyconstantlymonitoringcustomersinventoryanddemandstream,thenumberoflarge,unexpectedcustomerorderswilldwindle,ordisappearnThemanufacturerismorefocusedthaneverinprovidinggoodserviceandtheoverallserviceleve
18、lisimprovedbyhavingtherightproductattherighttimenSpeedandaccuracyofdataprocessingareimprovedduetocomputer-to-computercommunicationsnReducedtotallogisticscostandimprovedcash-flow10 and vendorsnSmoothingdemandthesupplierisabletosmooththepeaksandvalleysintheflowofgoods,andthereforetokeepsmallerbufferso
19、fcapacityandinventory.nBettercoordinationthesupplierhasbetteropportunitiestoco-ordinatetheshipmentstodifferentcustomers,suchasscheduling-eitherpostponingoradvancing-shipmentsaccordingtoproductionschedules,customerinventorysituationsandtransportationcapacitynReducedinventoryrequirementsbyknowingexact
20、lyhowmuchinventorythecustomeriscarrying,avendorsowninventoryrequirementsarereducedsincetheneedforexcessstocktobufferagainstuncertaintyisreducedoreliminatednSpeedandaccuracyofdataprocessingareimprovedduetocomputer-to-computercommunicationsnReducedtotallogisticscostandimprovedcash-flowThe binding of c
21、ustomers to vendors once relationship is established,customers will be reluctant to endure the amount of work needed to switch vendors11Currently,most automotive manufacturers in China consider Consignment Inventory as VMInVMIareusuallyusedasamethodtorealize“zeroinventory”whilethepartsaresittinginma
22、nufacturerswarehouse,vendorsareforcedtofinishthetransferifpartsownershipuntilassemblyisdonenConsignmentInventory,ontheotherhand,aretheexactpracticeofmostvendorsandmanufacturersvendorsarenotinvolvedininventoryandlogisticsdecisionsChallenges of VMI in China12This concept/belief reveals the transaction
23、al relation between suppliers and manufacturersnPrice-drivensourcingdecisionwithoutin-depthunderstandingofcoststructureLogisticscostandmaterialcostarecommonlyaddedupasalump-sum“CIFprice”Fewsuppliersarewillingto“opencost”totheircustomersunlessmarginisverythinSupplychainmanagementtargetsforcefullydriv
24、esupplierstoreducepricetomaintainbusinessrelationnPaymenttermsandpaymentsituationconstrainsuppliersfromgettinginventoryinformationunderconsignmentinventoryInventorymovementmeansactualconsumptionofproducts,immediatelystartingthemanufacturerpaymentcyclenNeithermanufacturersandsuppliersmakesignificanti
25、nvestmentinbuildingEDItofacilitatedatasharingWithout transparent data sharing and collaborative supply chain planning,lose-lose situation arises due to higher operation(transaction)cost 13To avoid the potential conflict between manufacturers and suppliers,an independent third party can be employed t
26、o help manage the VMI initiativenThird-partyconsolidatestheshipmentfromvarioussuppliersnThirdpartyfacilitatetheinformationexchangebetweenmanufacturer,consolidationandloadingcenter,andthesuppliersnInformationisneutraltobothsuppliersandmanufacturers,signalingtransferofownershipaccordingtopre-agreedter
27、msnThird-partycanhelpmanageinventory,unpacking,kitting,sequencinganddeliverytoline,milk-runningtheinboundpartsandpotentiallyplacingpurchaseorderonmanufacturersandsuppliersbehalfnOwnershipremainsunchangedbeforeorafterVMIisimplemented14However,internal resistance against outsourcing the VMI service re
28、mains generally very strong nNocommonunderstandingofhowthird-partycanhelpsmooththeVMIoperationnStaffcurrentlyinchargeofinboundlogisticsareafraidoflosingjobsnGeneralbelieftoholdpotential“profit”withinthecompanynNocostbenchmarktocomparetheoverallcostunderthird-partymanagementnResistancetoshareinventor
29、ydatawiththird-partynA cultural adjustment as well as a significant reorganization of everyday job duties is required to accomplish a major change of company operationsVMI will achieve its acceptance gradually,especially after the anticipated competitive environment in 2-3 years15A Chinese OEM outso
30、urced its inbound logistics to China Logistics for operating assets,skills and better managementOEM Inbound LogisticsnTheOEMwaspreparingformassproductionofanewpassengercarmodelonatotallynewplantnInthepast,thesupplierswereaskedtodeliverallcomponentstothelinesidewarehousenTherearenotenoughin-houseoper
31、ationstaffandspacetocopewithexpansionofproductionnThemanagementoftheOEMwouldliketofocusonmanufacturingofvehicles,whileoutsourcemostofitslogisticstothirdpartynChinaLogisticsrefurbisheda4,500Sq.M.warehousesituated8kmfromtheassemblylinenInaddition,emergencyorderscanbedispatchedwithintenminutesofnotific
32、ationanddeliveredtolinesidewithin30minutesnPartsarestored,pickedandmarshalledaccordingtowheretheyareusedontheassemblyline,withloadsconfiguredindirect-to-lineordernScalerampedupfrom40unitsperdayinNovember2002to180unitsinMarch2003nInatypicalweek,theChinaLogisticsteamhandlesmorethan3,000differentproduc
33、tlinesandmakessome250just-in-timedeliveriestolinesidereceivingpointsChina Logistics ApproachSituationSelected Case Studies16There are several different factors to consider in designing an appropriate inventory levelOrderto-deliveryleadtimeOrdersizeandfrequencyAnnualthroughputPerSKUdemandCompletevehi
34、clesalesvolumeCarparc(penetrationrate)TotalnumberofSKUsKittingorotherneedsPurchasingleadtimeTransportationleadtimePurchasingordersizeandfrequencyCustomer NeedsVolume ForecastSKU ComplexityInbound ProcessSolution SelectionTotal CostTransportationcostWarehousingcostLaborcostLevel of IntegrationSourceo
35、fmaterials(externalsuppliersorOEMfactory)LocationofsuppliersOEM Inbound Logistics17Current Operational Characteristics related to Materials Management20+domestic and 50+overseas suppliers SupplierSupplier1 1Customer involving:nLogistics DeptnQuality DeptnPlanning DeptSupplierSupplierX XSupplierSuppl
36、ier2 2SupplierSupplier3 3SupplierSupplier2222nnOperational characteristics:Component Supplier Inbound LogisticsAt present,Customer X directly contact a multitude of suppliers,to PlaceP/O;MonitorP/Ostatus,changeP/Oifnecessary;Receiveandunpackparts,storeandpickingInspectandsortparts;Delivertoassemblyl
37、ine;Checkdocumentationandfinallypayinvoice.It involves functions across the customer:ProductionPlanningQualityControlLogisticsandMaterialsManagementITFinance18Major capacity and quality issues arises when 50%annual growth is anticipatednUnder-capacityforwarehousingspaceThereareconstraintsasproductio
38、ncapacityneedstobeboomedtomeetincreasingcustomerdemandsnManufacturingflexibilityislowWhenpartsorderedbeforearealreadyontheirwaywhileproductionplanneedstobechanged,eitherthepartshavetogobackortheproductionplanhastoremainunchangedsincethereisnospacefortheunwantedpartsWhenpartsreceivedarefounddefectedp
39、roductionhasnotbeenabletoswifttoalternativeplanasthereislittleotherstockinthefactorynQualityhasbeencompromised:Asthereislittlestockonhandsomepartswithdefectshavetoberepairedandused,hencequalityisnotatitsbestfromtimetotimenCommunicationsconsumeplentyoftimeEachfunctionmayhavetocontactsuppliersfortheir
40、ownresponsibilitiestoconductthepreviouslymentionedactivitiesmakingtheoperationlesssmoothComponent Supplier Inbound Logistics19Project Roll-out ScheduleContract negotiation Supplier agreement negotiation SetupGo liveJulyJulyAugAugSeptSeptMain tasksWarehousedecorationOfficeset-upWMSSystemfinetuningSta
41、fftrainingProcurementofequipmentsInternalSOPQualityinspectioncapabilitiesimprovementMain tasksMain tasks PricePrice ProcessProcess SOPSOP KPIKPIMain tasksMain tasks InventoryInventorylevellevel PriceandPriceandPaymentPayment SOP&KPISOP&KPI NegotiatingNegotiatingcontracts,i.e.contracts,i.e.warehouse,
42、warehouse,equipmentsequipmentsetc.etc.StartingStartingrecruitmentrecruitmentMain tasksMain tasks SOPinplaceSOPinplace StaffinplaceStaffinplace QualitycontrolQualitycontrolprocedureinplaceprocedureinplace ITsysteminplaceITsysteminplace FacilitiesandFacilitiesandequipmentinplaceequipmentinplaceSeptSeptComponent Supplier Inbound Logistics20